Shares of General Electric (NYSE:GE) climbed Friday morning after analysts at Wells Fargo issued an Overweight rating on the stock with a price target of $144. The bank’s previous rating on the stock was Equalweight with a price target of $115, but coverage was transferred to new analysts and the stock was assumed/upgraded at Overweight.
Analysts see value in GE’s aerospace assets.
“GE combines an attractive business with high aftermarket mix, solid management team with a clean balance sheet, [long-term] margin upside and built-in catalyst with the Vernova spin in early Q2,” analysts said.
GE’s Vernova spin-off, which will include its power, wind, and electrification businesses, is scheduled for the beginning of the second quarter of 2024. The remaining company will be renamed GE Aerospace.
“We see high-teens pro forma EPS CAGR for GE (ex Vernova) over the next few years, driven by double-digit organic sales and ~4% from capital allocation, even with limited margin upside as dilutive LEAP engine sales ramp. Post spin, GE Aerospace has the highest aero aftermarket exposure in the group, driving strong pricing/margins and less downside if macro slows,” wrote analysts in a note to clients.
Wells Fargo’s price target is based on a sum-of-the-parts analysis. GE currently trades at $121, and the $144 price target suggests upside of almost 20%.